Breakingviews-ING should further carve up Asian insurance sale

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)

By George Hay

LONDON, Jan 23 (Reuters Breakingviews) - ING’s ING.AS
disposal of its insurance arm keeps getting smaller. The Dutch
bancassurer’s 2008 bailout left it needing to offload its entire
insurance business, which it first planned to do via separate
listings of the U.S. and Eurasian parts. Now it plans to hive
off its Asian operations to dispose on their own. To get the
best price, ING should do the splits one more time.

The simplest plan option might be to sell the whole thing to
AIA (1299.HK). The former Asian arm of AIG listed in 2010 is
sitting on $6 billion of surplus capital, and is keen to do
acquisitions. A full sale of ING's Asian insurance arm could
fetch more than $6 billion, according to Morgan Stanley. AIA
could tighten up its balance sheet in the process.

But a full valuation may be hard to achieve. For one, ING
may struggle to find rival bidders. Even though buying ING Asia
would catapult AXA, Manulife and Allianz into the top tier of
Asian insurers, ongoing euro zone troubles may deter some of
them from major acquisitions overseas. Prudential (PRU.L) of the
UK could be a contender, but may think twice given recent
memories of its failed attempt to buy AIA.

The other snag is that few of the interested parties,
including AIA, may want all of ING Asia. Pru and AIA seek
exposure to emerging, high-growth Asian markets like Thailand
and Vietnam. But three quarters of ING Asia’s gross premium
income comes from mature markets like South Korea and Japan. A
buyer like AIA might insist on a conglomerate discount.

ING might be better served splitting Japan, Korea and
Malaysia up. AXA and Manulife in particular have minimal
exposure to Korea. Meanwhile, it would be easier for Pru or AIA
to justify a full price for to their shareholders if they were
growing their presence in a target area.

The Dutch firm’s rush to meet its 2013 deadline to dispose
of its insurance assets may be premature -– other recipients of
2008 bailouts are already lobbying the European Commission to
allow disposal deadlines to be extended. But if the Commission
won’t budge, ING shouldn’t fear one more split.

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CONTEXT NEWS

-- AIA Group has invited four banks to pitch for advisory
roles connected with a potential offer for ING’s Asian insurance
business, Reuters reported on Jan 17.

-- Just under half of gross premium income at ING’s Asian
insurance arm came from South Korea in 2009, Morgan Stanley
analysts said on Jan 18. Just over a quarter came from Japan, 11
percent from Malaysia and 14 percent from other Asian countries.

-- ING’s Asian insurance operation currently has a book
value of about 6 billion euros. As of the first quarter of 2011,
AIA had $6 billion euros of surplus capital and no gearing,
according to Morgan Stanley.

-- AIA had 4.2 percent of the non-Japan Asia market in 2010
judged by annual premium equivalent, according to Credit Suisse.
Prudential had 3.1 percent. Allianz and ING had 1.6 percent
each, Manulife had 1.1 percent, Great Eastern 1 percent and AXA
had 0.7 percent.

-- ING shares have risen by over a quarter to 7 euros since
early January, when it said it would be pressing ahead with
plans to sell its Asian insurance arm separately.

-- For previous columns by the author, Reuters customers can
-- For previous columns by the author, Reuters customers can
click on [HAY/]

(Editing by John Foley and David Evans)

((george.hay@thomsonreuters.com))
Keywords: BREAKINGVIEWS ING/

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